A federal judge in Massachusetts has dismissed most of a complaint alleging breach of fiduciary duty that was filed by a former State Street Corp. employee against the Boston-based financial services giant.
In a March 15 ruling, U.S. District Judge Patti B. Saris agreed with State Street's petition to dismiss many allegations made by former employee Thomas U. Kenney regarding participants in the State Street Salary Savings Plan who invested retirement savings in the company's employee stock ownership plan.
Mr. Kenney claimed that State Street “negligently misrepresented and failed to disclose critical aspects” of the company's financial condition between January 2008 and January 2009.
State Street asked that the complaint be dismissed, arguing it had made “full and truthful disclosures regarding the status of the company and the riskiness of its assets,” according to the judge's ruling.
The judge dismissed Mr. Kenney's claim that State Street acted imprudently in its investments, saying the complaint failed to meet the legal standard for such a claim. “Plaintiff must allege sufficient facts to demonstrate that it was imprudent to invest in State Street stock” during the period cited by Mr. Kenney, the judge wrote. “Conclusory allegations of riskiness will not suffice.”
The judge also dismissed claims alleging mismanagement of plan assets as well as some claims based on several company news releases and filings with the Securities and Exchange Commission.
However, the judge didn't dismiss Mr. Kenney's complaint relating to an Oct. 15, 2008, company news release and 8-K SEC filing that said, among other things, that the asset quality of State Street's investment portfolio “remains high,” the judge's ruling said.
“It is true that in some contexts descriptions of assets as ‘high quality' have been held to be mere puffery,” the judge wrote. “Here, however, the sanguine statement that the asset quality ‘remained high' turned out to be misleading.”
Marie McGehee, State Street spokeswoman, declined to comment.
